What awesome, futuristic gadgets and
services is Microsoft's (MSFT) entertainment and devices division
cooking up? You'd never know from division president Robbie
Bach's presentation today at Microsoft's analyst day, which was
mostly a rehashing of recent announcements.

The big picture: Bach wants the Xbox to appeal to people beyond
hardcore gamers, and wants Windows Mobile to appeal to consumers
-- not just people whose companies stuck them with a smartphone
for email.

So Microsoft will be adding stuff to the Xbox like avatars -- an
obvious riff on Nintendo's popular Wii "Miis" -- and non-gaming
entertainment content, such as TV shows and
streaming movies from Netflix (NFLX).

And for mobile, Microsoft will use some of its recent
acquisitions -- like
Sidekick-maker Danger -- to add more consumer-focused
services to its Windows Mobile devices, which have mostly been
successful in the enterprise smartphone niche. One feature he
highlighted as an advantage over Apple's (AAPL) iPhone: The fact
that Windows Mobile phones come in lots of shapes, sizes, prices,
etc.

Bach also talked up mobile advertising -- and had a colleague
show off a wonky, unimpressive, ad-supported mobile video game --
a throwback to "Space Invaders," in which Microsoft's "clippy"
character (from MSFT's Office apps) danced around the cellphone
screen as Microsoft's Sean Alexander shot at Dorito chips. We
hope there's more to mobile advertising than this.

- Game lineup this year probably the best we've ever had. Going
to expand with more, broader content.

- Windows Mobile: Very successful year, gained share, outsold RIM
and Apple. Most success in a business context. People using for
email in a business environment. More "well-equipped" than Apple,
will beat RIM in corporate market. But also have to expand from
just a work device to being a device for consumers.

- Just released Windows Mobile 6.1. Going to make it easier for
people to find video, music, and games. Also expanding on idea of
choice. Not just one form factor that's going to work. You NEED
that diversity. (Take that, Apple!)

- Know that phone experience is about software and services.
Going to continue expanding work in software and services around
WinMo. This is
why we bought Danger, etc.

- Now to the "sneak preview" stuff from the "labs." Email from
his buddy Mark inviting him to play a Doritos game. Browser
automatically launches! Silverlight mobile app launches;
ad-supported game. Shooting Dorito chips. The graphics look like
something from an 8-bit Nintendo game. Nothing like iPhone apps.

- He wins! A barcode coupon that's good for a free or discounted
bag of Doritos. Clicks on the ad to launch location-based map
with participating retailers.

- Bach excited about this because user is participatin in the ad.
Can track user activity, track ROI.

- Q&A to begin. After Robbie fields questions, will take a
break as planned.

- What are you looking for in '09 in terms of margin improvement?
Won't go through in detail. But if you look across E&D, hard
to make one simple statement about that. Margin structure so
radically different for each area. Still think we can continue to
grow the business.

- How do you value the Xbox need to kind of drive share and lower
prices vs. profitability? Typically the way we think about those
issues are a function of cost management (we feel good) and
demand. We try to gauge pricing structure based on what's
selling. As you saw in Q3 and Q4, demand's very strong. Feel good
about demand.